Can a Prop firm issue a 1099 without being a Broker-Dealer?

Discussion in 'Professional Trading' started by aeliodon, Nov 7, 2007.

  1. I heard from a trader that trades with Avatar (LLC within Assent) - that they issue a 1099 Schedule C
    and I thought only brokers can issue 1099? I thought the usual approach for prop firms was a K-1.,,id=131138,00.html

    from greentrader website:

    What are the tax implications of receiving a 1099 Schedule C? Do you have to account for each and every single trade?
  2. 1099 on Schedule C = you pay Self Employment tax. K-1 from LLC, you are exempt from Self-Employment tax. Both ordinary income. No matching of trades that I recall when we issued 1099's.

    Another reason our Affiliates don't use Sub-LLC's. Our traders are all members of the main Company, and eligible for the tax benefits. Just FYI.


    This is not legal or tax advice, just my personal opinion, not that of Bright Trading or any of it's affiliated entities.
  3. Is this true of all Assent LLCs? Do they all issue 1099s?
  4. I find it shocking that one can run a "prop firm"...
    Without being registered as a broker-dealer.

    Anyone trader that would put money into such an entity is nuts.
  5. why are you shocked about it? they are trading their own capital.
  6. Don,
    do you know what the attachment on the K-1 says that makes prop traders exempt from paying self employment tax? has something to do with a mark-market election by the prop house correct?
  7. No. Some give 1099 and some K-1.
  8. Without being registered as a broker-dealer, their traders don't need register (i.e. no license required).
  9. don your spreading mis information again. your traders have zero tax benefits over any retail are other prop trader who files his returns as a trader in securities. wether you get a 1099 from
    a broker are a k-1 or 1099 from a prop house it makes zero difference it what tax writeoffs one can take. all can still do a sch c are in your case you take the traders expenses and give them a net k-1 after expenses i believe. now i don't know why a prop house would issue a 1099 instead of a k-1? is there a tax benefit to them?NOW DON IF YOUR DISTRIBUTING SOME OF THOSE MASSIVE COMMISSION OVERIDES YOU MAKE THEN YOUR TRADERS HAVE A HUGE ADVANTAGE. LOL
  10. I do believe that prop traders that get a k-1 do get a tax advantage, being exempt from self employment tax, as long as the the prop house makes the election on the k-1 for mark-market accounting. now I could be wrong, but that is what I have heard.
    #10     Jan 18, 2008